World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Thursday, March 3, 2011

Equity futures are higher this morning as the dollar sinks further, bonds fall, oil and gold are down slightly while the rotation of hot money moves back into food commodities.

Under the current set of conditions, it’s requiring a falling dollar in order to keep equities elevated. This morning, European Central Bank President, Trichet, said that he is considering raising interest rates as early as next month to help quell the pressure on oil and other commodities. But let me ask him this… what happens when money pours out of the bubbled up bond market, where will that money go to find returns?

So, the corner the central debt masters have painted themselves into is one that is impossible to escape. Many have tried throughout history, but it is always proven that in the end all debts are repaid, with interest, in one way or the other. Currently we’re using inflation which means that instead of higher taxes making payments on loans, you are paying for the interest every time you fill up your car, eat, heat your home, or buy clothes. Creating inflation as they are is just another “rob Peter to pay Paul” scam.

And the economic disinformation is just thick. Palpable.

Productivity and Costs were released this morning and they make it clear that the data is manipulated and warped. For Q4 2010, it was reported that Productivity increased a whopping 2.6% quarter to quarter (10.4% annualized), and yet Unit Labor Costs fell .6%! Here’s the lie in the data… Productivity comes from dollar measured GDP. When a banker makes a loan it is counted as productivity. Huge increases in productivity are simply not true, and I note that productivity was falling while deflation was occurring. Here’s Econoday:

HighlightsDespite downward revisions to fourth quarter GDP, productivity was unrevised for the same period. Nonfarm business productivity rose an annualized 2.6 percent, matching market expectations. The third quarter boost of 2.4 percent was nudged down to 2.3 percent. Unit labor costs also were unrevised at an annualized 0.6 percent dip, coming in marginally lower than analysts' estimate of a 0.3 percent slip. Third quarter costs were revised up slightly to a gain of 0.1 percent from the previous estimate of an annualized decrease of 0.1 percent.

While quarterly annualized figures have improved recently, year-ago productivity numbers continued to be weighed down by weakness in output in mid-2010. Year-on-year, productivity was up 1.9 percent in the fourth quarter-down from 2.9 percent in the third quarter. Year-ago unit labor costs worsened slightly with an annualized minus 0.1 percent in the fourth quarter from minus 1.0 percent in the previous quarter.

Overall, the productivity and cost numbers have been favorable toward corporate profits as companies have squeezed more out of workers not laid off during the recent downturn. However, many economists doubt this pattern can continue and firms soon will have to boost hiring to maintain output and revenue gains.

Today's release had no market impact but an unexpected drop in initial jobless claims lifted both equity futures and Treasury yields. The drop in claims is boosting expectations for a nice gain in payroll employment in Friday's employment situation report.

Yes, there has been some productivity improvement as technology takes over and as jobs are slashed, but that “improvement” is not on the order reflected by the huge gains reported. Corporate profits are up not just due to squeezing workers, they are up mainly due to accounting fraud and severe money pumping that feeds those at the top of the chain while starving those on the bottom. Literally:

There are your productive workers right there. Remember when the first of the month meant workers getting a paycheck? Not anymore, the rush is now on to spend the first of the month food stamps. And did you see the graph showing the growth in food stamps? That’s some economic recovery there, oh yeah employment must be skyrocketing with the number of people on food stamps growing exponentially.

But that’s exactly what you’re being shoveled, that employment is getting better. But in fact, there are now 1.5 million LESS workers this year than last. Are you being told that, or are the statistics being massaged in order to convince you it’s okay to spend? What exactly are you hearing from the mainstream media?

Expectations regarding this Friday’s Employment Situation Report are being raised. This morning the Monster Employment Report (a joke) came in at 129, up from 122. Does that impress you? Do you know that Monster simply looks at online job boards and such to come up with an index number? Hmmm… gee, I wonder if more people are looking for jobs/ workers online than they used to? In fact, I could build an argument that a stronger Monster report actually means the economy is worse, as employers move away from traditional, more expensive, job search activity to online. Just another reason not to make decisions based on data from companies or organizations who profit from the dissemination of data in their own industry.

Weekly Jobless Claims fell from 391,000 the week prior to 368,000 this past week. This data is trending down, but again it has been YEARS, not weeks with data well above the 350k mark that is considered demarcation between real job growth or not. Here’s the cheerleading:

HighlightsIn clear data pointing strongly to month-to-month acceleration for payroll gains, initial jobless fell a substantial 20,000 in the February 26 week on top of a 25,000 decline in the prior week. The number of claims, at 368,000, is the third sub 400,000 reading in the last four weeks (note the February 19 week was revised 3,000 lower to 388,000). The four-week average, down 12,750 to 388,500, is the first sub 400,000 reading of the recovery. Importantly, the Labor Department reports no special factors clouding the data.

Continuing claims are likewise moving lower, down 59,000 in data for the February 19 week to 3.774 million which is also a recovery low. The four-week average is down 40,000 to 3.864 million with the unemployment rate for insured workers slipping one tenth to 3.0 percent.

Money is moving out of the Treasury market in immediate reaction to this report which will shift expectations toward the high end for tomorrow's employment report.

So again, if employment is getting better, why is the number of people on food stamps skyrocketing? And if employment is getting better, why does the “Fed” need to pump billions into the markets every single day? And if employment is getting better, when do they stop the pumping and start raising interest rates to a normal range? And what happens if they do?

Guess what? It’s not going to happen, because the math is impossible. If it does, then interest expense across the board is going to increase and lay bare the lie, as skyrocketing commodity prices are already doing.

Meanwhile the banks in China are openly proclaiming their intent to make it easy for other countries to enact financial transactions denominated in Yuan rather than in the Dollar. And I note that the dollar is sinking below what was a major support area, despite “good” economic data. Why would the dollar weaken on “good” data?

No, the better the supposed data gets, the bigger the lie becomes. At some point the world will be asking why do they continue to pump money and hold interest rates at zero with Brent at $115 barrel, people starving, and the world in revolution?

Again, stop measuring data in devalued dollars, and you will see a completely different picture. The media bit that the “Fed” has been successful will end soon, but it will likely end with “other events” masking their true failures. Solutions to the impossible math DO exist! But they do not exist as long as we are unwilling to change out WHO controls the production of the PEOPLE’S money.